Relfe v. Commercial Ins. Co.

• Decision Date: 22 January 1878
• Citation: 5 Mo.App. 173
• Parties: WILLIAM S. RELFE, SUPERINTENDENT, ETC., Appellant, v. COMMERCIAL INSURANCE COMPANY ET AL., Respondents.
• Court: Missouri Court of Appeals

5 Mo.App. 173

WILLIAM S. RELFE, SUPERINTENDENT, ETC., Appellant,

v.COMMERCIAL INSURANCE COMPANY ET AL., Respondents.

St. Louis Court of Appeals, Missouri.

Jan. 22, 1878.

1. An insurance company cannot, even with the consent of the stockholders, make a valid voluntary assignment of its property, and thus withdraw itself and its property from the control of the Insurance Department of the State, after it has violated the laws made for the regulation of insurance companies. Such an assignment would be in fraud of those laws. Before suit is brought by the superintendent of the Insurance Department, under the statute, an insurance company whose capital stock is impaired may make itself sound; but while it attempts to do business upon an unsound basis, it is acting in fraud of the law; and while it fails to repair the deficiency, the interests of the policy-holder and the public are, by the law, intrusted to a court of equity under provisions created for the case, and the jurisdiction of the court cannot be ousted at the will of the offender. The State is a party to the proceeding, and a full exposure of frauds, if any exist, is essential to the purposes of the State in enacting the law.

2. The legal results of fraud upon the law cannot be indirectly avoided. Though the law relates only to “insurance companies doing business in this State,” a company, having violated and acted in fraud of the law while doing business in this State, cannot avoid its penalties by making an assignment, or by ceasing to take new risks, or by any other subterfuge resorted to for the purpose of evading the provisions of the statute for exposure and punishment.

APPEAL from St. Louis Circuit Court.

Reversed and remanded.

R. E. ROMBAUER, for appellant, cited: Price v. Insurance Co., 3 Mo. App. 273; Attorney-General v. Insurance Co., Insurance Agents & Brokers' Review, May, 1877, p. 77; Bank Commissioners v. Bank, Harr. (Mich.) 112; Barnes v. Relton, 8 Phill. L. 133; Jackson v. McCullach, 13 Bank. Reg. 283; Mayer v. Helman, 1 Otto, 500; 5 Biss. 499.

ZACH. J. MITCHELL, of counsel for appellant.

GEORGE A. MADILL, THOMAS E. RALSTON, and DAVIS & SMITH, for respondents: The company had a right to make the assignment at the time when made.--2 Dougl. (Mich.) 530; Schultz v. Sutter, 3 Mo. App. 137; De Ruyler v. Trustees, etc., 3 Barb. Ch. 119; 3 N. Y. 238; Haxton v. Bishop, 3 Wend. 13; McCallie v. Watson, 37 Ga. 611; Warner v. Mower, 11 Vt. 385; Flint v. Clinton Co., 12 N. H. 431; Dana v. Bank, 5 Watts & S. 223; Hurlburt v. Carter, 21 Barb. 221. The assent of the creditors of the company to the deed of assignment is presumed, the same being made for their benefit.-- Conway, ex parte, 4 Ark. 360; Brooks v. Marbury, 11 Wheat. 78, 96, 97; Brashear v. West, 7 Pet. 608. The notice given by the superintendent of the Insurance Department on the first day of June, 1877, to the Commercial Insurance Company, to make a special statement of its condition up to that day, did not affect the right of the company to make an assignment for the benefit of creditors.-- The State v. Commercial Bank, 13 Smed. & M. 569. Nor does the nearly approaching dissolution of a corporation, by expiration of its charter, affect its right to make an assignment.-- Buford v. Packet Co., 3 Mo. App. 159; The People v. Mauran, 5 Denio, 400. The assignment worked a dissolution of the company.-- State Savings Assn. v. Kellogg, 52 Mo. 583; Moore v. Whitcomb, 48 Mo. 543; Slee v. Bloom, 19 Johns. 217. The right of the assignee to wind up the business of the company is greater than that of the plaintiff herein.-- Schultz v. Sutter, 3 Mo. App. 137. Statutes in derogation of the common law and personal rights and privileges are always strictly construed, and no common-law right can be taken away by implication.--Dwar. on Stat. 257; Brown v. Barry, 3 Dall. 367. An affirmative statute does not take away the common law.-- Wetmore v. Tracy, 14 Wend. 250; Candee v. Hayward, 37 N. Y. 653; The People v. Bristol Co., 23 Wend. 222.

HAYDEN, J., delivered the opinion of the court.

This is a proceeding brought by the appellant, as superintendent of the Insurance Department of Missouri, under the laws in regard to insurance companies, against the Commercial Insurance Company for violation of those laws. There was a prayer that the company proceeded against be restrained from doing business, because it had become insolvent, and for a receiver, etc. A restraining order was granted under the first petition, filed on June 15, 1877; and on June 20 the appellant filed a new petition, in which John G. Priest was also made a defendant, the allegations of which are substantially as follows: That the company was incorporated under the laws of Missouri; and has been since 1855, and was still, engaged in business as a fire insurance company, in Missouri and elsewhere; that, having good reason to suspect that the affairs of the company were in an unsound condition, the appellant had, on June 1, 1877, demanded of it a special statement, which the company failed and refused to make; on the contrary, with intent to obstruct the petitioner in the performance of his duties as superintendent, and with intent of preventing the execution of the laws of the State provided for the regulation and winding-up of insurance companies, and in fraud of said act, the company became, and still continues, wholly unable to do so, by abandoning and dispossessing itself of all its books, papers, and other property, and by delivering the same to the defendant John G. Priest under color of a pretended deed of assignment, which deed was executed by the officers of said company under an order of its board of directors, and without the consent of either the policy-holders or stockholders of said company, and which is produced and shown to the court; that said company, thereupon, on June 13, 1877, through one Joseph Bogy, its then acting president, after demand made of it by plaintiff for permission to examine said books and papers for the purpose of ascertaining the true condition of said company, confessed that its capital stock was so impaired that it was unable to continue its business, and that, therefore, it had dispossessed itself of all its books and property under the pretended deed of assignment; that the Commercial Insurance Company is insolvent, and its condition such as to render its further continuance in business hazardous to the public and to those holding its policies; that, notwithstanding the fact that the pretended deed of assignment mentioned discloses the insolvency of defendant the Commercial Insurance Company, yet the said defendant John G. Priest has taken possession of part of the assets of the company, under said fraudulent and colorable deed of assignment, and threatens, unless restrained by the order of the court, to take possession of all the assets of the corporation, and to hold the same, and to administer the same under and subject to the terms of the aforesaid deed. The prayer asked that the company be restrained from proceeding with its business, from delivering any of its assets to Priest, etc., for the appointment of a receiver, and the dissolution of the company and the winding-up of its affairs under the statute, etc.

The restraining order was so extended as to prohibit Priest from taking charge under the assignment, and separate answers were filed by Priest and the company. That of Priest admits that the capital stock of the company was impaired, and that, so far, the company was insolvent; denies that it was engaged in business when the suit was brought; and alleges that on June 12, 1877, it ceased to do any further new business, and made the assignment, under the assignment law, for the benefit of all its creditors, which was accepted by Priest, and recorded; that the assignment was in good faith, in no way obstructed the appellant, and was assented to and confirmed by the stockholders of the company. It was further admitted that at the time of the assignment the company could not pay its creditors in full, and return to its stockholders the amounts they had paid on their stock. A reply admitted the material allegations alleged in his behalf by the respondent Priest.

The answer of the company admitted that the appellant demanded the special statement about June 1, 1877; that it had never been made; that the capital stock of the company was impaired; pleaded the assignment, and that the directors, on June 11, 1877, ordered it as the most economical way of winding up the business of the company; and alleged that, out of stockholders holding five thousand shares, the representatives of all but three hundred and five shares consented. To this a reply was filed, putting in issue the material allegations.

Upon the trial, the annual statement of the company for the year ending Dec. 31, 1876, being shown to the late president of the company, from the files of the Insurance Department, the signatures were proved, and it appeared the paper had been sent to the department as the statement of the company. The respondents then admitted, for the purposes of the trial, that the company was insolvent at the date of the assignment. With a view of showing that the assignment was not made in good faith, but to cover up fraudulent acts charged in the pleadings, and was in fraud of the insurance laws, the appellant offered to show that a lot of ground sworn in the annual statement to be worth $100,000, and as having cost that sum, was assessed at only $37,500, and had been bought by the company with its own stock, worth then only a nominal sum; that instead of six hundred and seventy-eight shares of stock in the Exchange Bank, sworn in the statement as being the company's property, it had only six shares; that the company never had the one hundred and ten first-mortgage bonds of the St. Louis, Kansas City, and Northern Railroad Company shown by the statement, or any other of the good assets shown by the statement, but only...